Charts Of The Day: Mixed performance for precious metals

Market Analysis / 4 Min Read
Milan Cutkovic / 20 May 2021

Highlights:

  • Gold facing headwinds from a stronger US Dollar
  • Silver experiences a sell-off following a false breakout
  • European equity markets started the trading week on a positive note but are back in risk-off mode
  • Under pressure oil prices weigh on the Canadian Dollar

Precious Metals

Precious metals have had a mixed performance. While inflation fears are keeping the demand stable, Gold faced headwinds from a stronger US Dollar which managed to bounce back following a multi-day losing streak. Nevertheless, with the medium-term outlook still positive, any potential dips are likely to attract enough buyers to keep the positive momentum intact.

The daily close above $1850 resistance and the 200 DMA gave Gold bulls a confidence boost. $1960 will be the next major obstacle for XAU/USD, while support is seen between $1845 and $1850.

While the Gold rally is not showing any signs of weaknesses yet, Silver experienced a sell-off following the false breakout above $28.35 resistance. Imminent support is seen at the rising trendline from the March low, followed by the $26.60/70 support zone. A clear break below the former level could spell trouble for Silver and signal a deeper correction towards the 200 DMA (currently near $25.31). The negative RSI divergence on the H4 chart is another sign that the retracement in XAG/USD might not be over yet.

GER30

European equity markets started the trading week on a positive note and initially performed relatively well, considering the sell-off on Wall Street. However, European markets are back in risk-off mode, with investors concerned about a spike in inflation and central banks being forced to tighten monetary policy earlier than anticipated.

The sell-off in the GER30 resumed today, with the index breaking below the psychologically important 15,000 level. While the index managed to regain some ground, the short-term outlooks turned negative and traders are using any larger rally as a selling opportunity. The key level to watch is 14,955 points (near to the 78.6% Fibonacci level of the recent sell-off). A breakout below this level could accelerate downside momentum and push the index towards the May low at 14,808 points. DAX bulls need this level to hold, as a daily close below could signal the beginning of a larger correction.

USD/CAD

Oil prices have come slightly under pressure recently, which is weighing on the Canadian Dollar. USD/CAD managed to find support just ahead of the psychologically important 1.20 level, and the currency pair is recovering following a major sell-off. With the broad downtrend clearly intact, selling interest is likely to increase as we approach 1.22 resistance. That said, the Daily chart is still signaling heavily oversold conditions, which increases the risk of a potentially larger short squeeze.

The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.

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